TC Energy (TRP.TO)

(Market Call Minute.) Has sold down his holdings in the last 6 months out of fear of the impact of higher longer-term interest rates might have on the valuations. Now getting back towards buying range. If Keystone does go ahead, he thinks it will get a fillip. The negatives of Keystone are largely discounted in the price.

A very well run Canadian company, but fully valued at 22 times earnings. It is a pure dividend play and rising interest rates will put a cap on price appreciation.

Now would be an interesting time. There is a clear pullback and test of a support. You could nibble here.

Pipelines, generally speaking, are not a bad place to be looking. With all the new development of resources, we are going to want to move them and he doesn’t believe this is all going to happen by rail necessarily. For this one, the big question today has been the Keystone XL pipeline, which appears to be a political football. Should that be turned down, the stock could take a little bit of a hit. If you have a 3-5 year outlook, you could safely buy it here.

This is tied into the whole question of Keystone XL and what happens. Of all the pipeline stocks, this is the one she does not own. She had concerns about natural gas transmissions in the pricing they would get on their mainline which was declining. Would prefer the other pipelines.

The interest sensitive stocks, utilities and pipelines, all got hammered in the last week or so. A bit premature. We haven’t seen a significant move in interest rates across the board. Most of the stocks have quite decent yields and well above anything you can get on the fixed income side. Pays a reasonable dividend.

Before he did anything with this stock, he would want to see the outcome of Keystone. If Keystone doesn’t work, then this company will get hit. They have a lot of inventory that will have to be disposed of.

60% of the value is priced into the current shares, so he's been trimming back. But a very good stock over the next few years.

Pipelines are a very good business in Canada. Highly regulated so profits are almost “baked in the cake“ when they take on some projects. Thinks the Keystone pipeline will go through, which would be positive development for Canada.

Just got a favourable ruling from the national energy board. Has done reasonably well but this is because of people looking for yield. He can’t justify paying 18 or 19 times earnings for a company that doesn’t have a lot of growth.

TRP has had a huge run and keystone may not be approved. TRP is fine with or without it but market may take it poorly. There is a virtue in taking profit and diversifying it may be a good idea.

Keystone XL has been hung up in the US political process. Very difficult to call. His guess is that it ultimately goes through because it makes sense. Even when it gets approved, it is going to take a while to have it come on line. Stock has been a fairly stable way to offer yield but he finds the stock expensive here relative to its growth potential.

He only has a small bit left but would be tempted to take a profit here. You are buying a company at over 2 times book value. Dividend is only 3.7%. It has had a great run but it frightens him. Approval of XL pipeline is built in to the price. If XL does not go through the stock could jump back.

Preferred D series 4%. A rate reset and a recent new issue. Possibly callable in April 2019 or it may get reset at 238 basis points of either the 5 year Canada or it can float above the BA rate at 238 basis points. Current yield of 3.91%. Yield-to-call (2019) is 3.56%.

Chart shows a steady uptrend from 2010. On a shorter-term basis, there’s no reason not to hold this one. A small breakout in the last few weeks is pretty positive.